SIMPLE

ANNUITY
Group 4
Annuity- is a sequence
of equal payments at
equal intervals of time
Simple annuity - an annuity for which the payment
period is the same as the interest period

Example: an annuity for which the interest rate is

compounded monthly and and payments are also
made monthly

 Terms
Term of an annuity (t) - time between the first payment interval and
last payment interval

Regular or periodic payment, (R) - the amount of each payment

Amount (Future Value) of an annuity (F) - sum of future values of all the
payments to be made during the entire term of the annuity

Present value of an annuity (P) - sum of present value of all the

payments to be made during the entire term of annuity
 Terms
R is the regular payment
I is the interest rate per period
n is the number of payments

R is the nominal rate

M is the number of conversion period
Future Value Formula
 Supposed Mrs. Remoto would like to sa
3000 pesos every month in a fund that
gives 9% compounded monthly. How
much is the amount or the future value of
her savings after 6 months
Present Value Formula
Rose works very hard because she wants to have enough
in her retirement account when she reaches the age 60
she wants to withdraw 36000 pesos every 3 months for
20 years starting 3 months after she retires. How much
must Rose deposit at retirement at 12% per year
compounded quarterly for the annuity
Seatwork
Periodic payment